The FOMC meeting this week is colliding with the UAW strike and a pending government shutdown. History could repeat itself this September as September historically trades flat for the first two weeks before dropping sharply in the second half of the month.
Unfortunately we only have historical data to use to predict where the stock market will go for the rest of this month, as both market sentiment and technical analysis point to a completely neutral market that could go either way.
Last Week Recap
The markets traded flat last week, coinciding with the neutral market sentiment we were seeing. Despite the inflation data coming in higher than expected, the stock market was down less than 0.5% on the week. Month to date, this now puts the DOW down 0.2%, the S&P down 1.2%, the NASDAQ down 1.9%, and the Russell down 2.7%.
So the historical September selloff has started, but what’s really concerning is the fact that historically the 2nd half of September is usually the worst part of the month. Usually the stock market falls over fears of a government shutdown at the end of the month, and once again we’re facing a possible government shutdown on October 1. So it’s possible we might see the selling accelerate into the end of the month before rebounding next month.
Market sentiment (https://www.cnn.com/markets/fear-and-greed) remains in the neutral stage at 52. The individual factors have not changed from last week, so unfortunately we don’t have a clear picture on where the market will go just based upon market sentiment.
Likewise the volatility index (VIX) also moved flat last week, finishing the week down just 0.36%. So the VIX did not give any indication from options traders to market direction either.
On the daily charts, the market is mostly flat, although the candles are bearish. All 4 major indices have the exact same technicals. The MACD and RSI are 100% neutral, while the candles are below both the 10 and 21 day EMAs.
The weekly technicals on the DOW, S&P, and NASDAQ are all the same. The candles are above all of the EMAs (bullish), with the MACD and RSI mostly neutral, although slightly bearish. Overall, I would consider this neutral, and once again the technicals give no indication of future market direction.
We start this week with home builder data that is expected to show a slowdown in the housing sector before getting the leading economic data for August on Thursday that is expected to show a slowdown in the economy.
But the economic news that everybody will be watching out for this week is the FOMC meeting on Tuesday and Wednesday. On Wednesday at 2:00pm EST (about 2 hours before the market closes), the Federal Reserve will announce their interest rate decision. While they are widely expected not to raise rates at this meeting, it’s what Jerome Powell will say at 2:30pm EST that everybody will be watching for.
If Jerome Powell indicates more rate hikes might be coming in the future, that could cause the market to sell off – although the market could also just as easily think Powell is lying and continue to rise. On the other hand, if Powell shows any signs that the Fed might actually be done raising interest rates for a while, we could see the market rally. So overall, there’s a better chance for the stock market to rise after the FOMC meeting than fall, but you just never know. We’ll just have to wait and see what happens.
On Friday, Fed officials exit their blackout period and we have three Fed members speaking, which could also move the markets.
Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar
Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm
With earnings season over, we only have a few companies reporting this week. Most notably, Autozone reports on Tuesday; General Mills, Fed Ex, and KB Home all report on Wednesday; and Darden Restaurants reports on Thursday..
Other Things to Know
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